The EBRD and Serbia have agreed to increase their focus on promoting local currency financing for small and medium-sized enterprises (SMEs) in the country on Feb 4.

A Memorandum of Understanding (MoU) will pave the way for the EBRD to start using donor funds for its local currency financing programme, which will make dinar loans even more affordable for local businesses. The document was signed today in Belgrade by the Ministry of Finance, the National Bank and the EBRD.

The Governor of the National Bank of Serbia (NBS), Mrs Jorgovanka Tabakovic, has said during the signing of the MoU that the NBS will continue to support projects that are in the general interest of the citizens of the Republic of Serbia and the development of the economy and the local financial market. "The EBRD’s readiness to finance small and medium-sized companies in local currency, bearing in mind that SMEs are a generator of growth and development in many countries, will undoubtedly support further growth of economic activities. Some of the key preconditions for the realisation of this, and many other projects, are the results that have been achieved in strengthening the macroeconomic environment. Political, macroeconomic and financial stability are essential for restoring investors’ confidence in domestic economic potential and economic policy,” said the governor.

According to the MoU, the parties recognise the importance of local currency intermediation and local capital market development and agree to increase efforts to promote local currency lending which shields businesses from foreign exchange risk. The EBRD, the government and NBS will now meet on a regular basis to consider specific steps, including technical assistance, to promote the local currency and money market.

The proceeds of the 2.5 billion dinar issue will be on-lent to local enterprises looking to reduce their foreign exchange risk.

Last year, the EBRD undertook a number of activities to develop local currency and local capital markets in the Western Balkans, notably the establishment of SEE Link, a virtual exchange which allows securities trading across the region.

To date, the EBRD has invested nearly €4.5 billion in a variety of sectors of the Serbian economy.